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House, Senate Introduce Bill to Replace SGR

Mary K. Caffrey and Tony Hagen
Published: Thursday, Mar 19, 2015

Capitol Hill Leaders in Congress today reached a bipartisan, bicameral deal to permanently repeal and replace Medicare's sustainable growth-rate (SGR) formula for paying physicians.

Both houses introduced bills detailing new terms. If enacted, the new legislation would eliminate a long-running source of frustration and fiscal uncertainty for both physicians and federal budget watchers. SGR made it hard for medical practices to plan ahead and for the healthcare system to move away from a fee-for-service system to one that rewards value.

“Both physicians and patients need a new Medicare reimbursement system that reflects the realities of current medical practice and we are excited to see Congressional legislation that addresses these needs,” ASCO said in a statement. “We look forward to learning more about the mechanisms for funding this critical legislation and look forward to working with Congress as it addresses this unsustainable model for providing cancer care to Medicare beneficiaries."

SGR was originally designed to prevent the pace of Medicare spending from exceeding gross domestic product growth. If costs per Medicare beneficiary in one year exceeded target SGR budget, an adjustment in allowable spending would be made to the following year’s budget, often threatening physicians with cuts in payment.

Congress has passed 17 consecutive short-term fixes dating back more than a decade to moderate those payment swings. Legislators supporting the bill said the annual “doc fix” patches have created uncertainty for millions of Medicare providers and beneficiaries.

A vote is anticipated next week ahead of an April 1 deadline. If passed, the bill would create a system that promotes higher quality care for the nation’s seniors, though work remains to be done before the legislation is enacted. Without congressional intervention, doctors would encounter a 21.2% cut in payments.

House Speaker John Boehner, R-Ohio, and House Minority Leader Nancy Pelosi, D-California, have reportedly been working on an agreement for weeks, which is worth $213 billion, offset by $70 billion in cuts elsewhere in Medicare and in provider payments.

The sponsors of the SGR replacement bill said it would end the annual threat to seniors’ care, while instituting a 0.5% “payment update” each year for five years. The bill contains provisions to strengthen Medicare and extend health programs including the Children’s Health Insurance Program.

The new bill would:
  • Improve the fee-for-service system by streamlining Medicare’s existing web of quality programs into one value-based performance program.
  • Incentivize the use of alternative payment models to encourage doctors and providers to focus more on coordination and prevention to improve quality and reduce costs.
  • Make Medicare more transparent by giving patients more access to information and supplying doctors with data they can use to improve care.
The problem with SGR dates back to 1997, when Congress created the formula in an effort to control spending. The National Center for Policy Analysis, a right-leaning think tank, has estimated it would cost $140 billion over 10 years to repeal the SGR. It said the reason Congress has been reluctant to change the formula is that many seniors would lose access to doctors.


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